Silver spot price aimless as strong US jobs data splits taper bets

San Francisco (Dec 6) Silver has today experienced hectic price action since a better-than-expected US Employment report split analysts on the future of US quantitative easing.

November’s Non-farm Employment Change checked in at 203,000 new jobs, easily beating a market consensus for 180,000. October’s number was revised marginally lower to 200,000 from 204,000, while September was upgraded from 163,000 to 175,000, producing a net upward revision of 8,000 for the prior two months.

Unemployment in the US last month fell by three-tenths of a percentage point to a 5-year low of 7.0 percent, versus the market consensus for a drop to 7.2. The fall in the jobless rate is partially explicable by furloughed federal employees heading back to work from their paid vacation during the government shutdown in October.

Paul Ashworth, a chief economist at Capital Economics, observes: “The 203,000 increase in November's non-farm payrolls, along with the drop in the unemployment rate to a five-year low of 7.0%, gives the Fed all the evidence it needs to begin tapering its asset purchases at the next FOMC meeting later this month.” But Goldman Sachs chief economist Jan Hatzius is sticking to his call that the FOMC will wait until March to announce tapering.

Steven Enlgander, global head of G10 Strategy at Citibank, believes that “the moderately positive payroll number has put gentle tapering up as a December/January possibility but it has removed any risk of harsh tapering ...” By ‘gentle’ tapering, Englander means just a $5 billion reduction in asset buying.

In a nutshell, although the strong jobs data has tilted the balance in favour of sooner rather than later tapering, the numbers aren’t convincing enough for the market consensus to become December and thereby bolster the greenback.

Predictably, spot silver had something of a knee-jerk drop after the releases, but it was limited to $19.39, reached in the first post-release minute. Since then, the precious metal’s been back on the up, rising to an intra-day high so far at $19.765.